Put These 10 Companies in Your Investment Shopping Cart

The average American shopper goes to the grocery store about 1.6 times per week, according to Statista. But, how many of those shoppers ever thought of their grocery stores as a possible investment opportunity? The truth is that many of the most popular grocery chains in America trade on the public stock exchanges, available for any investor to buy. Grocery sales are also becoming an ever-growing component of sales for multi-line retailers, from Walmart to Target to Costco. If you’re looking to diversify your portfolio with some grocery-oriented stocks, talk to your financial advisor to see if any of the names on this list are a match for your investment objectives and risk tolerance.

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Last updated: May 25, 2021

Sprouts Farmers Market (SFM)

• Stock price as of May 21, 2021: $25.80

Sprouts Farmers Market is focused on providing natural, organic food to consumers at reasonable prices. One of the many ways that Sprouts differs from other major grocers in that it doesn’t sell name-brand sodas, candy and snacks. After opening its first store in Chandler, Arizona, in 2002, the company has grown to 360 locations. Sprouts had a rough 2019, dropping over 20%, but it’s been clawing back ever since, jumping 8.68% in 2020 and 28.76% thus far in 2021. 

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The Kroger Co. (KR)

• Stock price as of May 21, 2021: $36.62 

Kroger is one of the most established grocery companies, with nearly 2,800 stores generating sales of more than $121 billion across two dozen brand names. Familiar grocery chains ranging from Food 4 Less and Fred Meyer to Foods Co. and Ralphs all fall under the Kroger banner. In addition to paying a solid 1.98% dividend, Kroger stock has posted a gain of 15.30% year-to-date, on the back of a 10.66% return in 2020. Those gains have pushed Kroger into the fairly valued category for now; analysts have a consensus “hold” rating on the stock, with an average price target just below current levels.

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Target Corporation (TGT)

• Stock price as of May 21, 2021: $225.35 

If you live anywhere in America, you're likely near a Target store. In fact, 75% of the U.S. population lives within 10 miles of a Target store. The general merchandiser, with a large grocery section, generated $93.6 billion in total sales in 2020. Target management expects sales to rise even faster in 2021 than they did in 2020, helping boost the stock to a 27.51% gain year-to-date as of May 21, 2021. The company's shift towards e-commerce has helped boost sales over the past few years, propelling the stock to a three-year gain of over 216%. If you're looking for some exposure to the grocery industry without putting all your eggs in one basket, Target might be an attractive option for you.

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Walmart (WMT)

• Stock price as of May 21, 2021: $141.84

Although Amazon garners a lot of the headlines, Walmart still remains the largest retailer in the United States, and stands to remain so for at least the next few years. Perhaps surprisingly, grocery sales accounted for a whopping 56.3% of Walmart's net U.S. sales in 2021. Walmart is working hard to boost its e-sales to compete with Amazon, and in its last quarter e-commerce sales rose by 37%. In addition to growing e-sales, rising grocery sales compelled Walmart management to raise its earnings expectation for the coming fiscal year. Add in a 1.54% dividend and you can see why analysts have a consensus strong buy rating on the stock, with a one-year price target of $167.24.

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Costco (COST)

• Stock price as of May 21, 2021: $380.72 

Costco is one of the most beloved retailers in America, and it’s rapidly becoming a one-stop-shop for its loyal customers. Grocery products are a huge part of Costco’s business, with fresh food sales alone generating $23.2 billion in revenue in 2020. In addition to being a favorite with customers, Costco is also a Wall Street darling, with a 5-year return of 185.42% and a gain of 33.92% in 2020 alone. The stock is a bit richly valued after all of these gains, but analysts still see Costco eking out gains of about 4.4% over the next 12 months. However, the long-term trend of the stock is clearly upwards.

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Grocery Outlet Holding Corp. (GO)

• Stock price as of May 21, 2021: $33.79 

Grocery Outlet is a discount grocer that was founded in 1946 and now has more than 375 stores across California, Nevada, Washington, Idaho, Pennsylvania and Oregon. Unlike major chain grocers, Grocery Outlet relies on surplus inventory, packaging changes and product overruns to deliver low prices on name-brand products to its customers. Investors with a long-term horizon just got a good price break on the stock, which tumbled 18.5% on May 12, 2021, after it disappointed investors with a lackluster forward outlook. Analysts still have a consensus strong buy on the stock, with a 12-month price target about 18% above current levels at $40.13. 

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iFresh Inc. (IFMK)

• Stock price as of May 21, 2021: $1.29 

If you're looking for a bit of a flyer when it comes to your grocery-related investments, iFresh might appear on your radar. iFresh was the first Chinese supermarket chain to be listed on a major U.S. exchange when it went public in 2017. The company now bills itself as the #1 Asian/Chinese supermarket chain across the East Coast.

Bear in mind that as a penny stock, purchases of iFresh Inc. stock should be considered highly speculative. The stock's trading history exemplifies this. While the company's shares are up a whopping 66% in 2021 alone, over the last five years the stock has lost 93.68% of its value, even after the 2021 pop. Be sure to talk to your financial advisor before wading into these waters.

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HelloFresh SE (HLFFF)

• Stock price as of May 21, 2021: $91.95

HelloFresh isn’t a grocer but rather a popular meal delivery service. HelloFresh customers pick meals online and have them delivered as often as weekly, complete with all necessary ingredients and recipe cards. After a rough 2018, in which the stock lost 57.85%, HelloFresh has been on an absolute tear, outpacing many of the big-name tech stocks that garner all the headlines on the financial news networks. In 2019, the stock bounced back a whopping 196.50%, but even that was dwarfed by the company’s 289.12% gain in 2020. That momentum has continued, with the stock up 12.96% thus far in 2021. If you’re a believer in the long-term viability of packaged meal delivery services, HelloFresh should continue to benefit.

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Dollar General Corp. (DG)

• Stock price as of May 21, 2021: $205.17 

Dollar General bills itself "America's neighborhood general store," and it's an apt moniker, with more than 17,000 stores in 46 states. In addition to more general items, such as cleaning supplies, housewares, seasonal items and paper products, Dollar General also sells food and snacks. While not a grocery store per se, food items make up an important part of Dollar General's product line. Yet, an investment in Dollar General offers access to general retail trends in addition to grocery sales. The company pays a modest dividend of 0.82% and analysts see the stock rising about 12% over the next year.

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Dollar Tree, Inc. (DLTR)

• Stock price as of May 21, 2021: $108.58

Dollar Tree and Dollar General have some similarities and are major competitors in the "dollar store" industry. One of the main differences between the two companies is that Dollar Tree is a true "dollar store," with almost all merchandise for one dollar or less, whereas Dollar General is more of a general store offering discounted prices. Analysts see similar gains for the two companies over the next 12 months -- 12% for Dollar General vs. about 10% for Dollar Tree -- but which one you choose might depend on the type of investor you are. Dollar General has greatly outperformed Dollar Tree over the past five years, at 151.32% vs. 41.23%. Whether you think Dollar General has simply gotten ahead of itself or that Dollar General is simply the better-run company will determine which stock is the better option for you.

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About the Author

John Csiszar

After earning a B.A. in English with a Specialization in Business from UCLA, John Csiszar worked in the financial services industry as a registered representative for 18 years. Along the way, Csiszar earned both Certified Financial Planner and Registered Investment Adviser designations, in addition to being licensed as a life agent, while working for both a major Wall Street wirehouse and for his own investment advisory firm. During his time as an advisor, Csiszar managed over $100 million in client assets while providing individualized investment plans for hundreds of clients.

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